Sales Slump, Piracy to Be Hot Topics at NARM

Restoring sales in the beleaguered music retail industry will be topic No. 1 at this week's annual convention held by the National Association of Recording Merchandisers (NARM) taking place in Orlando, Fla., March 16-19.

That's “top of the list,” according to Pam Horovitz, president of NARM, who will open the business sessions March 17 and will challenge retailers and suppliers to find ways to overcome a soft economy and “value sensitivity” on the part of music consumers, who are busy file-sharing and burning their own CDs. The industry has to “find ways to offer a more compelling value proposition to the consumer via singles, value ads, mid-lines, etc.,” Horovitz said.

Joe Pagano, Best Buy's SVP of music and trend merchandise, acknowledged that while the music business still faces tough challenges, he sees “signs of optimism” in the business, with sales declines slowing and a steady stream of product from exciting new talent and major stars like Celine Dion, Sting and Fleetwood Mac on the horizon. “I think the industry is rallying around the need for change, and that doesn't mean just lowering prices. It means looking at many ways of improving the value proposition of prerecorded music and that includes the digital model,” Pagano said.

Best Buy is a member of Echo, the recently announced digital distribution consortium of six major retailers, including Best Buy, Hastings, Tower, Transworld, Virgin and Wherehouse, formed to offer a retailer-supported alternative to such label-backed efforts as Pressplay and MusicNet.

Pagano is also excited about DVD-Audio (he's participating on a panel discussion of the technology at NARM) and said as consumers become aware of its benefits, he looks forward to retailers promoting it as “the best music you will ever see.”

Programs on anti-piracy efforts and music DVD are expected to be big draws. Hilary Rosen, outgoing chairwoman and CEO of the Recording Industry Association of America (RIAA), will be the keynote speaker and will doubtless talk about the RIAA's efforts to combat music piracy, which she cited as “a major cause” of 2002's 8.2 percent slide in music industry revenue (VSM, March 9-15), which totaled $12.6 billion. CD unit sales were down 8.9 percent from 2001.

“We still don't have a viable alternative for digital distribution in place for retailers, and thus, while progress is being made, it hasn't been at a pace fast enough to offset the sales slump,” said Horovitz. “Fortunately for retailers, many carry DVDs, which has partially offset the lost revenue for music, as have games and other ‘lifestyle' products.” Music DVD grew to 10.7 million units shipped in 2002, up 29 percent from 2001, according to the RIAA.